Staff Member

To troubleshoot, what happens if you disable this from WHM all together, save, and then attempt to generate a password for that user logged in as that user? Does it work? If yes, go back and enable it via WHM again, and try setting another for this user the same way. Does it work then?

Are you by chance using RVskins on this server?

You could instead, put in a ticket to cPanel via WHM > top right corner of any page, click Support > Contact cPanel, or post this as a bug if you like if you'd rather not troubleshoot.